The structure of state utility commissions and protection of the captive ratepayer: Is there a connection

From the late 1980s until the present, strict economic regulation of public utilities, which has acted as a stand-in for competition, has been challenged. As competition has entered the market the incumbent local exchange companies have petitioned state regulatory commissions for less restrictive forms of regulation. In response, several state regulatory commissions have authorized more relaxed forms of regulation, granting companies varying amount of regulatory freedom.; Recognizing that there was not sufficient competition at the local level to protect captive ratepayers from companies that were (and still are) largely monopoly providers, states also adopted one or more provisions to protect captive ratepayers. The theory proposed in this research attempts to model variations in commission consumer protection decisions.; While there is a considerable body of literature on regulatory decision making, the dominant theories have emphasized the influence of external factors on commissioners, which largely result in capture. Underlying these theories is the assumption that resources translate into influence. The theory proposed in this research is that while resources are necessary, they are not sufficient. Instead, they are mediated by two conditions: one, the structural characteristics of each state commission, which enable it to acquire and analyze information and two, the attributes of the type of protective device which commissions could have adopted.; The guiding research hypothesis is that the greater the ability of the commission to acquire and analyze information, the more likely it is to enact more stringent measures to protect the captive ratepayer.; The study's conceptual framework emphasizes three dimensions of agency structure (resources, analytical ability, and commissioner motivation), two environmental dimensions (political and demographic) and five dimensions of regulatory decisions (freedoms granted with regard to setting of prices and retention of earnings and restrictions imposed with regard to setting of prices, maintenance of service quality, and plan length/plan review). Unlike several previous studies, agency structure and regulatory environment are broadly conceived and regulatory performance is measured, not in the level of the commission's response to the utility but in the level of their protection of the captive ratepayer.; The research design is a comparative state policy analysis, using 38 decisions made by commissions in 34 states and the District of Columbia over the 1987 to 1994 period. To reduce the number of variables, a number of indices were developed, modeled on those used in past research efforts. Multivariate analysis was used and the research findings provide strong support for the proposed research hypothesis.; The major implications of this research are two. One, this research suggests that commissions react not just to political pressure and economic incentives, but also to information. Indeed, this research asserts that information is a significant determinant in the decision making process. Two, where the general public has neither the knowledge nor the understanding to take a position with regard to an issue, a regulatory commission with greater resources and more professional personnel is more likely to be its champion than is a commission with fewer resources and less professional personnel.